Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020

Lord Stevenson of Balmacara Excerpts

Tuesday 19th January 2021 Grand Committee

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I start by thanking the Minister for introducing the SI this afternoon in his usual calm and unflustered way and for getting across the main points, for which we are always very grateful.

This has been a good debate and has raised much wider issues than perhaps might have been expected, because these are continuations of a continuation, and because of the concern expressed by a number of speakers that, as time moves on, we are moving into a situation where the temporary becomes permanent, and the implications of that.

We all recognise the points made by my noble friend Lord Sikka on the need to look more widely at insolvency issues as a result of some of our experiences in the Covid pandemic, but these issues were there beforehand. I should be grateful if, when he comes to respond, the Minister could give us more of a timetable for when and if we will look again at insolvency issues, because there are some substantial ones to be addressed—not least the question of the priority of secured creditors, but also of HMRC as a preferential creditor, which I shall come back to.

The noble Lord, Lord Bourne, made some interesting points about whether we should be expecting an impact statement at some point, but what we are looking for is a little broader. It is whether these proposals, which have been coming through in dribs and drabs, arising from the founding legislation, are having the effect we want: if they are, how much, and, if not, what are the implications? There is no criticism here of the Government’s approach to what we are dealing with; they have done all they can in the time available to do it, and we should always acknowledge that. However, as the noble Lord said, as time goes on, we begin to wonder whether we are heading in the right direction and, if so, how and in what form we could review that without in any sense jeopardising where we are.

Other speakers have drawn attention to a wider range of things, including the impact all these proposals are having on the high street and the future of retail. These are issues that probably would not have become as exposed as they are without this pandemic, but we will have to address them.

We should also be very careful about the point made by the noble Baroness, Lady Jones, who I think put her finger on it. If HMRC is to have an engaged and supportive approach to insolvency in its capacity as a preferential creditor, is it actually structured in a way which will allow that to happen for the benefit of UK plc? At a very crude level, HMRC is there to make sure that we, the taxpayer, pay our taxes and pay them promptly. We have had a change, in some senses, with the new breathing space proposals coming forward for personal creditors—those suffering unmanageable debt—and that is to be welcomed, but I wonder whether the Minister will speculate a little about any changes that might be necessary to HMRC’s founding principles if it is to take up this role as our green saviour, and our saviour of particular jobs and industries that we want preferred and supported as we come into the recovery phase. What exactly are the expectations here on HMRC? I do not quite recognise where we might be heading, given how HMRC is currently established and operates.

I have only one other point, to which I do not think there is an easy answer but which I should be grateful if the Minister would reflect on and perhaps write to me about, if necessary. The issue that comes forward out of all this is whether we can reasonably expect a petitioner to be able to satisfy a court—which is obviously a very high standard of requirement—that the company’s inability to pay is, as the Explanatory Memorandum says,

“not due to coronavirus”.

I am here grappling with the difficulty of proving a negative. How and in what form can a petitioner prove that, in a situation where a creditor could be the Inland Revenue but is more likely to be the banks, and they are putting forward a case for recovery of money outstanding to them? Exactly what will the nature of the evidence be, given the ongoing nature of the coronavirus, that will be crucial for the court to determine that such an inability to pay is indeed “due”—which is a very strict term—to the coronavirus? I do not think there is an easy answer to that, and I am not expecting one from the Minister, but perhaps, when he has had time to reflect on it, he could write to me about that.

This has been a good debate and I look forward to hearing the Minister’s response. We do not object to the extension of the SI.